Junket operator looks abroad as graft war stymies VIPs

David Group, a Macau junket operator that serves higher-spending casino customers, is expanding into other Asian countries as China’s anti-corruption campaign deters VIPs from visiting the world’s largest gambling hub.
David Group is shutting three of its seven rooms that cater to high rollers at casinos in Macau, it said in a Jan. 17 statement. The company, which runs rooms at casinos including those operated by Sands China Ltd. and Wynn Macau Ltd., is taking the action as part of changes prompted by an industry downturn, Frank Ng, the company’s director of corporate communications, said in a phone interview.
“We’re adjusting our business strategy; this is a general trend in the industry,” Ng said. “We’re hibernating. Once we wake up, we can restart.” The company can reopen the rooms when the market conditions improve, he said.
David Group joined other junket operators including Suncity Group and Hengsheng Group in expanding to markets beyond Macau as the city’s casinos last year suffered their first annual decline in revenue amid Chinese President Xi Jinping’s continuing battle on corruption. The overseas plan is also part of the company’s strategy to follow the government’s guidelines to develop the city into a global tourism destination, Ng said.
SJM Holdings Ltd. led declines in casino shares, dropping 5.5 percent at the close of trading in Hong Kong to the lowest level since October 2011. MGM China Holdings Ltd. declined 4 percent, Sands China Ltd. slumped 3.8 percent, while Galaxy Entertainment Group Ltd. fell by 3.4 percent. The benchmark Hang Seng Index declined 1.5 percent.
Nomura analysts led by Stella Xing wrote about the company’s plan to close VIP rooms. David Group is one of the city’s 10 biggest operators, with a 3-5 percent market share, she said, citing unidentified people at industry information provider MGG. Ng declined to comment on the market-share figure in the Jan. 15 interview or to disclose the company’s casino revenue.
The Chinese government’s clampdown on corruption and extravagance has cut David’s high-end clients’ spending on gambling tables, he said. The group expects the casino industry to recover from the fourth quarter as more resorts open, boosting customer traffic and revenue, Ng said.
David Group, which also runs a travel company, owns private jets and luxury cars such as Mercedes-Benz to take rich Chinese gamblers to Macau and around the former Portuguese colony.
The stricter traveling rules in Macau have diverted more gamblers away from the territory and caused them to go to places with easier access, Ng said.
David Group is taking more wealthy customers to Asian centers with more relaxed visa approval process, such as Manila, Vietnam and South Korea, Ng said. The company plans to enter the Australian market by the end of the year and later to expand to Europe, he said, without providing a timeframe.
David takes its VIPs shopping and sightseeing, and allows them to gamble at its private rooms in local casinos, he said.
As part of its marketing strategies to draw gamblers, David Group publishes a lifestyle magazine in China to promote its brand. It also owns a film production company. Stephanie Wong, MDT/Bloomberg